No matter what resolution you choose, if the picture fills your TV screen then it is being scaled somewhere.
The reason to choose 480i/p, is because that is the resolution stored on the DVD, which eliminates the scaling done in the player and allows the AVR (if it supports scaling of the HDMI input--many don't) or TV to do the work.
720p, isn't all that great of a choice because it is only half-scaled, and then the picture has to be processed again by the TV to get it up to the screen size. But have a look, some people swear by multiple smaller scaling steps in Photoshop (I don't).
